Tokenized payment system introduced by Fnality; £20 million funding announced
Fnality International, a digital cash settlement network, has announced the launch of a new feature: earmarking of funds for specified transactions at specified times. This feature is designed to enhance the reliability and trust of the platform, particularly for institutional cross-border settlements.
The earmarking function secures liquidity for settlement by reserving cash or digital assets in advance. This ensures that counterparties can be confident that settlement funds are available and cannot be re-used or recalled. By reducing settlement risk and delays, the feature helps ensure that earmarked assets meet the regulatory and operational requirements for immediate and irrevocable settlement finality.
This mechanism aligns with legal standards for settlement finality under regulations such as the European Directive on Settlement Finality or equivalent financial regulations. It also supports regulatory compliance by facilitating smoother integration with existing clearing and settlement infrastructure, giving institutional actors better control over payment instructions and funds flow.
The development of the earmarking feature was carried out by Lloyds Bank, Santander, and UBS, the first banks to go live on the sterling Fnality payment system (£FnPS). John Whelan, Managing Director of Digital Assets at Banco Santander, stated that the earmarking feature helps enable atomicity in transactions, bringing the utilization of blockchain technology in the banking industry one step closer.
Fnality, an institutional settlement solution using tokenized central bank reserves, has attracted significant investment. In 2019, the company raised a total of £50 million ($66m) in Series A funding. This was followed by a Series B funding round in 2023, during which Fnality International raised a total of £77.7m ($103m), with investors including Goldman Sachs, BNP Paribas, and DTCC.
The company is backed by 20 of the world's largest global financial institutions. Fnality is planning to launch a dollar version of its settlement system and has applied for a banking license. As of the end of 2024, Fnality had almost £34 million in cash on hand, but the company reported a pre-tax loss of £28.9 million for the year in 2024. Despite this, the company did not earn any revenue in its first full year of operation.
The name of the new US subsidiary is Fnality XB, suggesting plans for cross-border payments. This aligns with Fnality's biggest goal: to expand FX settlement once a second currency goes online, with the vision of delivering a multi-currency digital cash settlement network that operates with the same reliability and trust as central bank money but leverages blockchain technology for speed and transparency.
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